Tories welcome May's Brexit deal but EU warns of trade talk delays

Theresa May’s “hard won” deal with Brussels to widen the Brexit negotiations was publicly praised by all sides of her divided party, but the EU warned that ongoing splits in the cabinet could still delay serious talks about trade until deep into 2018.

While May was lauded by her ministers for striking an agreement in the early hours of Friday morning to move the Brexit talks on to the future relationship, a statement was being drafted in Brussels for agreement by EU leaders next week in which they will call on the UK to offer urgent clarity over their vision for the future.

Until then discussions will be largely limited to the terms of the two-year transition period requested by the prime minister under which the UK will remain under EU law and the European court of justice but without a decision-making role in the institutions.

EU citizens

EU citizens in the UK and UK citizens in the rest of the EU have the right to stay. Rights of their children and those of partners in existing “durable relationships” are also guaranteed.

UK courts will preside over enforcing rights over EU citizens in Britain but can refer unclear cases to the European court of justice for eight years after withdrawal.

Irish border

The agreement promises to ensure there will be no hard border and to uphold the Belfast agreement.

It makes clear the whole of the UK, including Northern Ireland, will be leaving the customs union.

It leaves unclear how an open border will be achieved but says in the absence of a later agreement, the UK will ensure “full alignment” with the rules of the customs union and single market that uphold the Good Friday agreement.

However, the concession secured by the DUP is that no new regulatory barriers will be allowed between Northern Ireland and the rest of the UK without the permission of Stormont in the interest of upholding the Good Friday agreement.

Money

There is no figure on how much the UK is expected to pay but the document sets out how the bill will be calculated – expected to be between £35bn and £39bn.

The UK agrees to continue to pay into the EU budget as normal in 2019 and 2020.

It also agrees to pay its liabilities such as pension contributions.

Other issues

The two sides agreed there would be need for cooperation on nuclear regulation and police and security issues.

There was an agreement to ensure continued availability of products on the market before withdrawal and to minimise disruption for businesses and consumers.

The deal was widely welcomed by the Conservatives, but did highlight divisions as some remainers claimed it was the “nail in the hard-Brexit coffin” and had set Britain clearly on track to a deal that would replicate the benefits of the customs union and single market.

However, Brexiters argued that nothing was agreed until everything was agreed, and warned that Britain should keep open the option of crashing out on to World Trade Organisation rules.

Whitehall sources said a battle would now commence within the government over what the final Brexit deal would look like – with Boris Johnson and Michael Gove unlikely to agree with others such as Philip Hammond and Amber Rudd over the best final outcome.

On Monday, May will meet her cabinet to update them on talks so far and open the door to discussions about transition. In the next cabinet meeting - likely to be on 19 December – talks will move onto the so-called “end state” – the government’s settled position on the final Brexit deal.

But a senior EU official warned that ministers still appeared to believe in Johnson’s claim that it was possible for the UK to “have [its] cake and eat it”.

“The UK has not been particularly specific,” the official said. “It has been setting out a number of red lines, but what the UK has been saying so far still entails a number of internal contradictions and does not seem entirely realistic to us.

“I read in the press that the cabinet has not yet discussed this matter,” the official added. “We need more information from the UK to really be able to engage.”

The EU’s chief negotiator, Michel Barnier, made it clear in a press conference earlier in Brussels that the UK’s agreement to pay a divorce bill of €40bn-€45bn (£35bn-£39bn) would also not buy it the “deep and special” relationship sought by the prime minister.

Barnier said the prime minister’s insistence on leaving the single market and customs union left Brussels with no choice but to work on a post-Brexit free trade agreement modelled on the bloc’s deal with Canada.

The so-called Ceta deal offers less generous market access than that enjoyed by Norway and does not cover the financial services sector so vital to the British economy. “Not everyone has yet well understood that there are points that are non-negotiable for the EU,” Barnier said.

The president of the European council, Donald Tusk, warned the prime minister that the toughest discussions were still to come. “While being satisfied with today’s agreement, which is obviously the personal success of Theresa May, let us remember that the most difficult challenge is still ahead,” Tusk said. “We all know that breaking up is hard. But breaking up and building a new relation is much harder. Since the Brexit referendum, a year and a half has passed. So much time has been devoted to the easier part of the task. And now, to negotiate a transition arrangement and the framework for our future relationship, we have de facto less than a year.”

Beyond the lack of clarity from the UK, the delay in opening substantive discussions about the future was also because member states have not had the time to settle their own position beyond basic principles.

There was uncertainty in Brussels right up until the early hours of Friday that sufficient progress would be made on the opening withdrawal issues – citizens’ rights, the financial settlement and the Irish border – for the European commission to recommend to leaders next week that talks should be widened to include the terms of a transition period and future relationship.

When it came, the prime minister – at a joint press conference with the commission president, Jean-Claude Juncker – admitted to having difficult talks in recent weeks, in particular over how to avoid hard border with Ireland.

Hopes of striking a deal on Monday had collapsed spectacularly when the DUP reacted angrily to a leaked text suggesting Northern Ireland would have a special status and remain in “regulatory alignment” with the EU after Brexit.

The new text suggests that the UK as a whole will stay aligned to avoid the need for customs checks on the border with the Republic.

May told reporters: “Getting to this point has required give and take on both sides. And I believe that the joint report being published is in the best interests of the whole of the UK.

“I very much welcome the prospect of moving ahead to the next phase, to talk about trade and security and to discuss the positive and ambitious future relationship that is in all of our interests.”

Tusk has drafted guidelines on the transition period for the UK once it leaves on 29 March 2019 under which the UK will have to accept current and new EU laws, as well as the jurisdiction of the European court of justice, without having any seats in decision-making institutions.

As it will no longer be an EU member, the UK will also fall out of the current free trade agreements the bloc has with countries around the world, and will need to come to an arrangement to avoid sudden obstacles to global British trade from 29 March 2019.

Some at the top of government are keen for the prime minister to offer the EU more regulatory alignment to help improve the trading arrangement, even if it cuts off hopes of a US-style trade deal with lower standards in areas such as agriculture.

But sources admitted that key Brexiters would be wary of any outcome that limited Britain’s ability to diverge from the EU.

Matthew O’Toole, a former Downing Street official who worked on Britain’s relationship with the EU, said the promise to both maintain a soft Irish border and promise the DUP that there would be no sea border placed ministers in a particular position.

“In order to satisfy both, the government has had to acknowledge the possibility of a softer Brexit,” he said. But he said the wording was “still a fudge” that allowed both sides to be satisfied for now.

Ultimately it was still difficult to be both outside the customs union and single market and keep that soft border, he said. “That choice hasn’t gone away.”